Entrepreneurial Theories - still relevant today?
Are entrepreneurial theories still relevant today?
Entrepreneurship has become a raging phenomenon in the last few years, not just in India but worldwide. However, according to the Economic Survey of 2022, India currently has 61,400 start-ups, 14,000 of them were incorporated in 2021 alone. This is 20 times the figure which was prevalent 5 years ago.
In 2011, long before entrepreneurship became a household term, I studied Entrepreneurship and Management at Lancaster University. This course covered all elements of the entrepreneurial process, including creativity, opportunity recognition, sales, finance, entrepreneurial leadership and effective communication. During my course, I extensively studied very interesting theories related to entrepreneurship.
In this series, I am going to discuss some interesting theories in the field of entrepreneurship and if they are still relevant in today’s times.
To begin with, I am going to review an age-old debate in the field of entrepreneurship, “Are entrepreneurs born or made?” What was the first thing that came to your mind when you read this line? Born? Made? Before you rattle your brain endlessly, spoiler alert, there is no correct answer to this question.
Discussing first, are entrepreneurs born?
This dwells more into the aspects of the ‘nature’ of the entrepreneur. However, it goes deeper than just possessing the personality and aptitude traits. It’s about executing the same. Can you imagine Bill Gates selling a street clothing line? Or Elon Musk starting a cosmetics company? They found a way to match their traits and what they were really meant for in the best way possible. According to a study by the Journal of Labour Economics (2015), upbringing, rather than genetics, seems to have the biggest influence on the offspring of entrepreneurs. They examined the career choices of thousands of Swedish children raised by either adoptive or biological parents to compare the relative effects of nature and nurture on their entrepreneurial impulse. They found that adopted children were 20% more likely to become entrepreneurs if their biological parents were also entrepreneurs. But if their adoptive parents were entrepreneurs, the percentage increased to 45. Multiple studies have even gone ahead to indicate that there may be an “entrepreneur gene” or at least that people with certain generic characteristics and personality traits are more likely to be successful entrepreneurs than others. John Gartner, a famous Psychologist also writes about this theory in this book, The Hypomanic Edge (2005). According to him, entrepreneurship is innate and successful entrepreneurs have a distinct personality trait. These characteristics could range from infectious energy, irrational confidence, big ideas to being really quick decision makers. Think of the entrepreneurs that you know personally? Do you think these theories hold true for them? Were they born this way or somehow life managed to transform them?
This brings me to my second point, are entrepreneurs made?
This is more probable in my opinion. The circumstances, our immediate network and the overall environment plays a huge role in this. When there is a lack of jobs in the market, especially during recessions, we see a lot of people turn to entrepreneurship as a result of their circumstances. This has been proven by Robert W. Fairlie in his study in the Journal of Economics and Management Strategy (2013) where he talks about how recession affected people’s decisions to start new businesses and led to a surge in entrepreneurship. Not all entrepreneurs are born with “entrepreneurial traits” but they understand how to ‘nurture’ them along the way. To be a successful entrepreneur, there are certain skills like financial literacy, economics, logistics and their knowledge is not something anyone is born with, it’s always acquired.
You must have heard of the theory that you are an average of the 5 people that you spend maximum time with. This is not because they would give you money (well sometimes they might) but because they share something more valuable with you, knowledge and experience. John Assaraf, a brain researcher, believes that 50% of our thoughts and actions are genetically based due to our heritage but the other 50% is what we learn from our environment and conditioning as children.
In my opinion, entrepreneurs are both born and made. There are certain traits that they are born with but there is also a lot of experiential learning that happens in the journey. At the end of it, it’s about the execution of the traits, fire in their belly, hunger, and eventually a point where nature meets nurture. Although one thing is certain, Entrepreneurship is not just about starting your business, it’s an ideology, a way of life.